State's civil justice system a leading factor in lost jobs and revenue

Louisiana Lawsuit Abuse Watch (LLAW) released the 2018 Economic Benefits of Tort Reform, an assessment measuring the impact of excessive civil court costs on Louisiana’s economy. The study, conducted by The Perryman Group for Citizens Against Lawsuit Abuse (CALA), found that Louisiana is losing jobs and revenue because of the state’s civil justice system. The assessment included extensive survey data, industry information and a variety of corroborative source material. The Perryman Group analyzed outcomes in the state using Ohio, which has engaged in notable tort reform in the recent past, as a benchmark.

The total current impact of excessive tort costs on the Louisiana economy amounts to estimated losses of $1.1 billion in annual direct costs and $1.5 billion in output (gross product) annually. About 15,556 jobs are lost when dynamic effects are considered. All major industry groups are negatively impacted, with retail trade, business services, health services and other service industries showing the greatest losses. The yearly fiscal losses (as of 2018) are estimated at $76.4 million in state revenues and $64.3 million to local governments. These effects are based on the current size of the state’s population and economy and can be expected to rise over time in the absence of meaningful civil justice reforms.

The assessment found that an inadequately balanced justice system can be counterproductive. A system that generates exorbitant levels of damages or numbers of awards may result in negative impacts through the misallocation of society’s scarce economic and human resources. Some of these negative effects include increased costs and risks of doing business in an area; disincentives for innovations which promote consumer welfare; enhanced incentives to file lawsuits of questionable merit resulting in increased inefficiencies; higher insurance premiums than would exist under a more balanced approach; and increased health care costs and declining availability of medical services, among others.

“These findings clearly show that civil justice reform must be a priority in Louisiana. Frivolous lawsuits and exorbitant plaintiff awards impact all sectors of our economy and hurt Louisiana families, as costs are ultimately passed down to them in the form of higher prices for goods and services,” said LLAW Executive Director Lana Venable.

Civil justice reforms that have resulted in the greatest reduction in losses are those aimed at reducing frivolous lawsuits, capping appeal bonds, setting negligence standards and limiting non-economic damages. These reforms have been shown to enhance innovation and increase productivity, as well as to improve judicial efficiency and economic performance.

According to the assessment, when working properly, the judicial system provides a critical institutional framework that provides a fair and equitable forum for resolving disputes, compensates plaintiffs who have been legitimately harmed and deters undesirable behavior.

“A healthy legal system should ensure fairness for both truly impaired individuals and small and large businesses operating in Louisiana. Imbalances in the system lead to unpredictability for consumers and businesses, costing jobs and resulting in constrained economic growth,” according to Louisiana Coalition for Common Sense Executive Director Jim Harris.

Louisiana was ranked 50th in the US Chamber Institute for Legal Reform’s 2017 Lawsuit Abuse Climate Survey, which measures the reasonability and balance of each states’ tort liability systems. Louisiana also earned the number eight ranking in the American Tort Reform Foundation’s 2017-18 Judicial Hellholes Report based on systematic application of civil laws and court procedures.

Click here to download the Potential Economic Benefits of Tort Reform in Louisiana.

Contributed by the Louisiana Press Association